Activision Blizzard has bought King, what does that mean?

Earlier in the week Activision Blizzard announced that they had purchased the Candy Crush Saga makers King for $5.9 billion dollars. You may need a minute to process that, that is billion with a B. That is a lot of money, but many may not know what the money means. You could be the person that put 300 hours into Diablo III or perhaps Farm Heroes is the game that you sit down to play every night before bed, but why should you care about this combining of brands if you don’t know what it means?

One of the statements that the acquisition papers keep going back to is stating that Activision Blizzard is the world’s most successful standalone interactive entertainment company.

Activision Blizzard, Inc., a member of the S&P 500, is the world’s most successful standalone interactive entertainment company. It develops and publishes games based on some of the most beloved entertainment franchises, including Call of Duty®, Destiny, Skylanders®, Guitar Hero®, World of Warcraft®, StarCraft®, Diablo®, and Hearthstone®: Heroes of Warcraft™.

The paragraph goes into detail stating all of the successful titles that the company has published recently, excluding other recent titles that may not have done well for the company e.g. Tony Hawk Pro Skater 5. The offer goes on to explain that one of the big reasons that Activision Blizzard wants to purchase King is so it can sustain its title as the most successful standalone interactive entertainment company through the remarkable medium of mobile games.

As a leader in the interactive entertainment business, Activision Blizzard recognizes the importance of mobile gaming as part of its envisioned growth strategy. Mobile gaming is expected to be the largest and fastest-growing area of interactive entertainment—it is expected to generate over $36 billion of revenue by the end of 2015, and grow cumulatively by over 50% from 2015 to 2019. Activision Blizzard believes that King provides it with key capabilities in mobile gaming that will help Activision Blizzard to execute its strategy and further position it as a leading interactive entertainment company across key platforms.

This is one of the first points that is incredibly important that come from the offer. According to this statement, “(mobile gaming) is expected to generate over $36 billion of revenue by the end of 2015, and grow cumulatively over 50% from 2015 to 2019.” To put that into perspective, the MPAA (Motion Picture Associate of America) released a “Theatrical Market Statistics” report back in January of this year stating in 2014 “Global box office for all films released in each country around the world reached $36.4 billion.” In the music industry the IFPI (International Federation of the Phonographic Industry) put out their “Digital Music Report” in April stating that the music industry generated $14.97 billion in 2014.

These comparisons are hard to compare in some respects because they are different costs of course. A person may pay $15 to see a movie in theaters on the big screen with 3D while they may also stream all of their music on Spotify without paying anything. I compare these three industries in more of a broad sense to convey how large the mobile gaming market is.

While the company is insuring that their revenue will continue, another number that they are securing is their user base.

This Acquisition will create one of the largest global entertainment networks with over half a billion combined monthly active users in 196 countries. This global audience will reach across casual and core gamers, female and male players, and developed and emerging markets throughout the world. Direct relationships with this large and diverse audience will extend Activision Blizzard’s reach, creating opportunities to cross-promote content and engage new players with Activision Blizzard’s franchises.

Going back to that billion word again, that is a large number. 500,000 would actually make Activision Blizzard the biggest video game host of a user base in the world. Even if Steam, Playstation Network and Xbox Live combined all of their users it would not be half of that number.

Aside from the number, the above statement would mean that Activision Blizzard is planning on utilizing the King acquisition to promote their properties across multiple platforms in hopes that new players will try their other products. I wouldn’t worry about the next Destiny event having Candy Crush live events or anything similar in other games but it would not be surprising to see suggestions in the app store to the company’s other mobile game Hearthstone if consumers have been playing some of King’s mobile titles.

The CEO of Activision Blizzard commented on the acquisition in relation to the user base, saying the following.

Bobby Kotick, Chief Executive Officer of Activision Blizzard, said, “The combined revenues and profits solidify our position as the largest, most profitable standalone company in interactive entertainment. With a combined global network of more than half a billion monthly active users, our potential to reach audiences around the world on the device of their choosing enables us to deliver great games to even bigger audiences than ever before.”

 As the audience that plays games begins to become bigger and bigger, we start to see the social aspect of games change drastically. What used to be simple invites on Mafia Wars has now become multi-platform games where players can interact with each other through move involved mechanics. Activision having such large audiences under its massive money umbrella opens up their reach to try new things in the mobile market involving cross-platform games and social networking. It may not be something we see from the company, as they aren’t known especially for their risk-taking within the industry, but they certainly have the ability to with those numbers.

For those that play King’s games this purchase is almost entirely a good thing. The company put out a statement back in May which said that they had “softer” revenue expectations than the first quarter and their shares fell as low as 14 percent. At the time they stated that the release of Candy Crush Saga on Windows 10 and other new titles releasing in 2015 would bring their revenues back to the expected amount but this acquisition would certainly make one believe that they never reached satisfactory numbers. So this acquisition will sustain the company’s titles for the foreseeable future, leaving farming, candy crushing, pet loving bubble witches to their mobile games.

There are a lot of benefits that I can see resulting from this deal, but the amount of power that the company holds with all of its intellectual properties and revenue scares me. Activision Blizzard does not hold the power to something that everyone needs such as electricity but the fact that the company could be influential to 500 million+ people sounds like the goal of some mad scientist in a science fiction movie.